By Barbara Kollmeyer
Stock futures are rising, as optimism is in the air over a potential breakthrough for negotiations between Ukraine and Russia on Tuesday.
Obviously not just markets would welcome a halt in the humanitarian disaster. Apart from that obvious point, other worries have focused on disruptions to farming in the global breadbasket of Ukraine.
“The #1 improvement this week: Ukrainian forces are successfully defending Kyiv and there’s more optimism that Russia will focus efforts only on the Donbas region,” noted David Whitcomb, head of research at Peak Trading Research, a Geneva-based quantitative commodity trading and research group. “That means farmers could be able to get more crops in the ground with confidence over the coming weeks. We’ll see…”
That brings us to our call of the day , from Chris Rawley, CEO of Harvest Returns , a crowdfunding real estate platform that focuses on farmland. He recently spoke to MarketWatch about potentially overlooked agriculture investments.
While farm-based exchange traded funds, and grain futures are all options, Rawley views those as “more of a speculative product. Also these commodity trades are used by farmers and ag businesses as a hedge instrument,” he said.
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His sweet spot is farmland, though on its face is not cheap or easy for the average investor, said Rawley. Some of the world’s biggest billionaires are landowners, such as media mogul Ted Turner who owns 2 million acres, Amazon.com’s /zigman2/quotes/210331248/composite AMZN +1.64% CEO Jeff Bezos who has amassed 420,000 acres and Microsoft /zigman2/quotes/207732364/composite MSFT -0.47% co-founder Bill Gates’s 270,000 acres, he notes.
One way in is through is farmland REITS, such as Gladstone Land /zigman2/quotes/208235033/composite LAND +0.35% or Farmland Partners /zigman2/quotes/204952044/composite FPI -0.34% , up 100% and 20% over the past year. He points to another option that he also sees as accessible — farm, farmland and agricultural investments via private placements, which is in the wheelhouse of Harvest Returns.
How it works? Buying a 1,000 acre farm and its crops would take hefty capital that the average investor can’t manage. “If you put a bunch of those investors together, you’re able to pool those investments and go in and buy the same type of farmland or timberland or greenhouse indoor vertical farm,” he said. “That’s the way we do it.”
A minimum investment is about $5,000 to $10,000, so still not cheap. As for returns, he said over the past 10 years, farmland has returned about 11%, he noted. That’s versus an annualized return of around 14% for the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.14% . For more detailed information on farmland returns, check out the NCIRF Farmland Index .
Farmland equipment is yet another option, with Deere & Co. /zigman2/quotes/207941296/composite DE +0.75% front and center, up 26% so far this year, which would make its fourth year of double-digit gains.
Rawley also notes one newer side of farming they’ve been taking interest in — indoor agriculture, also known as vertical farming or controlled environment agriculture that cuts food waste and spoilage as crops can be grown 365 days a year.
Stock plays on that include Spring Valley Acquisition , AppHarvest , Kalera and Hydrofarm Holdings /zigman2/quotes/223043492/composite HYFM +7.38% . Most of those companies have lost ground over one year, with Kalera down more than 80%, but AppHarvest up 50%.
Kalera is expected to go public on the Nasdaq this spring via a merger with Agrico Acquisition , a Nasdaq publicly traded special purpose acquisition company.
The buzz
Reports suggest some progress in the latset talks between negotiators over the deadly war in Ukraine in Istanbul on Tuesday , and Russia has reportedly said it will “radically reduce” military activity outside Kyiv and Chernihivs. Ukraine earlier said it would declare its neutrality and compromise on the contested Donbas region.
The U.S. is eyeing sanctions on Russian industry, targeting sectors that keep its “war machine” running, a top official said Tuesday .
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